1. ABC, Inc. is expected to pay a dividend of $3.15 per share next year, and this dividend is expected to grow at a 5% rate annually forever thereafter. Given the risk level of the stock, investors require a 12% return. What should be the market price of ABC Inc.’s common stock?
$25.00
$26.25
$42.86
$45.00
None of the answers are correct.
2. Sue invested $1,000 eight years ago. If the investment is now worth $2,476, what rate of return has Sue earned on her investment?
12.0% 18.5% 11.4% -10.7% None of the answers is correct.